Oil Prices Plunge

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Overnight and this morning prices for crude oil are plunging.  2 weeks ago $80/barrel was a key level for West Texas Intermdiate crude, but yesterday as prices dropped below that level MLP’s barely reacted.  This morning prices have been as low as $76.50–a huge $3/barrel drop. We shall see how the oil related issues react today.

One item you can be certain of is that distributions for exploration and production companies MLP’s will be cut if these prices remain for a number of months.  Which companies cut and by how much is totally dependant upon the amount of hedging they have done and when they need to hedge in the future.  The only way to know for sure is to read 10 q’s which outline the hedging each company has in effect and how much of the production is pre-sold.

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